In this blog post, we will analyze the investment climate and the situation with FDI in Indonesia and provide some hints on how to establish a foreign investment fund in Indonesia, what laws regulate their activities and other local features.
Investment climate
FDI in Indonesia increased by IDR 106 trillion. (7.492 billion USD) in the third quarter of 2020. Singapore was Indonesia's top source of investment with US $ 2.7 million, accounting for 40% of total FDI. It was followed by China, which began to reopen its economy with $ 1.3 million. USA, which accounted for 18.9% of total FDI.
The Indonesian authorities are actively encouraging FDI to the country's special economic zones in order to spur the country's economic development. This time, investors are offered a 20% to 100% discount (in the latter case, tax holidays) on income tax for a period of 10 to 25 years. Import duties on the import of raw materials required for production for foreign companies operating in Indonesian special economic zones can also be zeroed.
Now, Indonesia has 8 special economic zones. One is on Java, the most populous and economically developed island in Indonesia.
The rest of the economic zones are open on other islands, that is, the administration is trying to stimulate the development of the peripheral regions of the country.
To receive priority business licensing regime in Indonesia, a company must meet the following criteria:
- total investment of at least 100 billion rupees;
- attracting a local workforce of at least 1000 people.
It is easy to obtain a license for investment business in Indonesia for:
- projects that are part of the manufacturing supply chain;
- legal entities participating in the tax vacation program;
- nationwide strategic projects.
Temporary licenses are provided for:
- processing of oil, gas or refined products;
- storage of oil, fuel, liquefied petroleum gas, natural gas;
- trade in oil and refined products.
Obtaining a permit for investment activities in Indonesia
In this jurisdiction, establishing an investment fund as a whole is not difficult and does not take much time. Moreover, there are no threshold requirements that could serve as a basis for revising the transaction to create a foreign investment fund in Indonesia.
There is also no special procedure for obtaining permission to carry out investment activities in Indonesia. If the investment is allowed and meets the capitalization requirement, then the transaction will take place. This will be followed by an automatic update in the OSS so that any changes to the business data are updated.
Obtaining a Business Identification Number upon registration is mandatory for every entrepreneur doing business in Indonesia. It serves as the Indonesian company registration certificate and importer's distinctive number, and also provides customs access. One cannot obtain a license to do business in Indonesia without BIN.
It is also important to consider that the acquisition of a foreign investment fund in Indonesia through a share issue, resulting in a change in control of the company, must be made publicly.
Legal assistance
In order to establish a foreign investment fund in Indonesia, it is crucial to know the laws of this jurisdiction and comply with them. Legal advice on registering a foreign investment fund in Indonesia will help you become familiar with the requirements of local regulators. Do not hesitate to contact our experienced professionals using the feedback form below.
